USD/JPY – Yen Edges Lower as US Consumer Confidence Sparkles

USD/JPY has edged lower for a second straight day. In Tuesday’s North American session, the pair is trading at 111.50. On the release front, The BoJ released its minutes from the June policy meeting. In the US, CB Consumer Confidence jumped to 121.1., easily beating the estimate of 116.5 points. On Wednesday, the Federal Reserve will release a rate statement, and the US publishes News Home Sales.

The Bank of Japan minutes highlighted a split among members as to how much information the bank should disclose regarding a potential withdrawal from its quantitative easing program. Some members were in favor of full disclosure about the bank’s plans, while others said that publicizing information about an exit too soon could lead to market volatility. As expected, the BoJ maintained its ultra-loose policy, but there was an unexpected development, as the bank revised upwards its forecast for consumer consumption, for the first time in six months. An additional complication for policymakers is that the BoJ is now trailing other central banks with regard to tightening monetary policy – the Federal Reserve and Bank of Canada recently raised rates, and the ECB and BoE are contemplating tighter policy. This factor could weigh on the Japanese yen.

The Federal Reserve is in the spotlight, as it holds its monthly policy meeting on Tuesday and Wednesday, With the odds of a rate hike at just 3%, the markets will be focused on the Fed’s rate statement, which will be released on Wednesday. US numbers in the second quarter have been mixed, and inflation remains well below the Fed target of 2%. Given these economic conditions, investors are unsure if the Fed will raise rates in December, with the odds currently at 47%, according to the CME Group. Analysts will be looking for nuances in the language of the statement, and a dovish tilt from the Fed could hurt the dollar and boost the red-hot euro. Another issue for Fed policymakers is the $4.2 trillion bond portfolio, a result of the aggressive quantitative easing program which was put in place after the financial crisis in 2008. In June, the Fed outlined plans to reduce its bloated balance sheet, with experts circling September as the start date of the reduction.

 

USD/JPY Fundamentals

Monday (July 24)

  • 19:50 BoJ Monetary Policy Meeting Minutes

Tuesday (July 25)

  • 9:00 US HPI. Estimate 0.5%. Actual 0.4%
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 5.8%. Actual 5.7%
  • 9:59 US Richmond Manufacturing Index. Estimate 7. Actual 7
  • 10:00 US CB Consumer Confidence. Estimate 116.5. Actual 121.1
  • 19:50 Japanese SPPI. Estimate 0.8%

Wednesday (July 26)

  • 10:00 US New Home Sales. Estimate 615K
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.25%

*All release times are GMT

*Key events are in bold

 

USD/JPY for Tuesday, July 25, 2017

USD/JPY July 25 at 11:00 EDT

Open: 111.17 High: 111.60 Low: 110.79 Close: 111.51

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
108.69 110.10 110.94 112.57 113.55 114.37

In the Asian session, USD/JPY edged higher but then retracted. The pair edged lower in the European session but has recovered in North American trade

  • 110.94 is providing support
  • 112.57 is the next resistance line

Current range: 110.10 to 112.57

Further levels in both directions:

  • Below: 110.94, 110.10, 108.63 and 107.49
  •  Above: 112.57, 113.55 and 114.37

OANDA’s Open Positions Ratios

USD/JPY ratio is unchanged in the Tuesday session. Currently, long positions have a majority (54%). This is indicative of trader bias towards USD/JPY reversing directions and moving upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.